A Comment -- General Comments From an Expert (A Commentary)

Markets. He used to buy tickers without knowing what they did. He did zero analysis of financials. It was just what the crowd was doing. He is a little cautious right now. We are into the traditionally worst 6 months of the year. It is interesting that the FANG stocks are rolling over. Looking at AMZN-Q, which he owns, is topping out right now. We will probably get near a 10% correction on these stocks. The question is if you will pick the exact peak and exact bottom. The likelihood is a pull back to their trend line.

WTI Oil. You are near the bottom of the trading range. It is not risky at this point, but range bound. You can trade stocks if the range is big enough.

Gold Bullion. It generally looks positive and you are entering a period of seasonality. It is setting up for a good trade. If it breaks $1295 you probably have a winning trade on your hands.

Canadian Dollar. Near term it will likely move up, based on the US$ pulling back. Oil has an influence. The longer term picture is still favourable to the US. FXC-N, long term, shows the big picture is a down trend.

Energy. The big problem with energy is that OPEC historically, when they want to resolve the issue, one cut of 1.2 million never does it, it usually is a multiple number of cuts. The problem is, with the data coming out in May, OPEC is producing 600,000 barrels a day more than demand. The 1.2 million barrels a day of compliance is being offset by Libya, which is now producing almost 830,000 barrels. They are a non-quota member of OPEC. Nigeria is now 200,000-300,000, so half of the cut by OPEC is being offset by OPEC. The US is now producing a million barrels a day more. In 1997-1999, they cut 3 times for a total of 3 million barrels. In 2000-2002 they did 4 cuts of 5 million barrels. Going to 2008-2009, they did 2 cuts of 3 million barrels. To become bullish, he would need to see them cut 2 million barrels a day more, with Saudi Arabia taking over 1 million of it. He would then become a Bull overnight.

Market. There is a huge swath of stocks that are really struggling. 60% of the S&P 500 gain this year is accounted for by only 5 stocks. If you remove those stocks, you feel like you are underperforming. He suggests being constructive, roll up your sleeve and look for opportunities in sectors and stocks that have underperformed and still have opportunities. We still have a very low interest rate environment. The federal reserve is set to raise rates next week, and he expects they will be much more dovish in the commentary, and we may not get that 3^rd rate hike.

Commodities. As a value investor, he is interested in this area. It is an area of the market that people are kicking away because it has no growth opportunities, and that is when you want to embrace them. On the other hand, the fact they are down is almost a bullish factor for the rest of the market. We are not seeing a huge global demand, otherwise commodities would be doing better.

Percentage of foreign exposure in a portfolio? The wider you cast your net, the more fish you are likely to pick up. If you just confine your search for investment bargains to your own country, you are going to be missing a lot of opportunities. Secondly, the most important tenet of investing is diversification. That doesn’t mean you necessarily have to buy a foreign company. Many US companies have a lot of their business coming in from overseas.

Markets. You have so many markets at record levels that there are dangers out there. His strategy is to take things off the table or lighten up when they hit targets. He is buying less than he might otherwise have done. He lightens up when markets are bad. This is when he goes looking for bargains. The field to play in is less now. Before Trump got elected they said markets would do poorly if he got elected, but then they went straight up after the election. There is a real question as to where oil is going to go. He sees $60-$80 by the end of 2018.

Canadian Energy Market. He has only two energy stocks making Up 2% of his portfolio. If you find good energy plays with reasonable debt loads, he would like to buy them. He likes when a sector is badly beaten up. It is a place to be looking.

Market. Because of our high debt levels, etc., global economic growth is going be stalling. GDP growth in the West is running at about 2%, and a number of years ago it was double that. We have to get used to a new speed limit. Economic growth will be lower, and as a result, capital markets will go up by a less robust amount going forward. When you deal with the situation where markets are lower and people are living longer, that means that instead of retiring at 63 we are hovering around 64 or 65, and he would not be at all surprised that 8-10 years from now, the average retirement age in Canada would be over 66.

Breakeven age for taking CPP at 60, or delaying until 70? If you are going to be living to age 70 or so, he would take the CPP at 60. If you are going to be living from 70 to 80, he would take it at 65. If you’re going to make it beyond age 80, he would wait until age 70 before taking it. Note, you get 100% of your benefit if you retire on the month your 65^th birthday. Every month before, you lose 0.6%, i.e. 7.2% per year.

In a portfolio between bonds, Index ETF’s and dividends, which should go into TFSA, RRSP and non-registered accounts? It would be better to put your bonds in your taxable account and avoid the 50% capital gain on something that actually goes up by putting your stocks into your RRSP and TFSA.

Market. Volatility has been ultra low, almost non-existent. Part of this is because investors are now becoming more accustomed or used to being bombarded with information. The last 5 years was more of the early stages of that. Access to information has never been as great as it is now. The early stages of that caused investors to over manage their accounts. The bigger risk is when you start to build immunity to bad news and you don’t see any volatility. That’s when you start seeing equities get ahead of themselves. Some volatility is a good thing, because it provides stocks with a reality check, and helps their valuations stay in line.

Gold. He has been quite bearish on commodities as a whole, particularly oil and energy over the last year. The last time he held gold was between June/07 until late 2012. In the last few months, he has started taking a weighting in this again. It is less of a call on gold going to $1500-$2000, but more from a portfolio construction perspective. We can’t get complacent because we have had no volatility and markets continue to head higher and higher. He started building some insulation into portfolios, without expecting any sort of a meltdown.